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104 SCHEDULES AND TIME COMPRESSION

Project is an exception, offering this unique capability. How-
ever, it should be easily possible to transfer data from your PM
database to a spreadsheet and generate the analyses there.

Carrying this process even further, we can evaluate a set of projects and ma-
nipulate the mix of projects to optimize support of the full business strategies and
plans. We hear a lot lately about Project Portfolio Management. A significant
component of this corporate-level strategy is the schedule-based cash flow analy-
sis of multiple projects. (See Section 9, Project Portfolio Management.)

Risk Considerations

Up to now, we have talked about schedules as if they were based on well-defined
task durations. But we all know that this is an illusion. Task durations are based on
time estimates and effort estimates. These are always based on one or more as-
sumptions, and these assumptions are subject to interpretation. What tends to
happen is that all such estimates are developed with some built-in contingency.
Yes, we do run into instances where an optimistic individual offers a “best chance”
estimate. But most estimates assume that one or more conditions will exist to
stretch a task past its achievable duration. So a 10-day task gets 2 days added for
possible weather delays, another 2 days for resource conflicts, 1 more day for
equipment problems, and perhaps another 3 days just for comfort. Now, with the
10-day task up to 18 days, we add a couple of days because we know that the proj-
ect manager will ask for a 10 percent improvement, to expedite the schedule.

There are many ways to address this dilemma, such as using multiple estimates
(PERT durations) or shared contingency concepts such as Critical Chain and
Project Contingency Allowance techniques. (See Chapter 3.2.) However, there is
one aspect of this condition of which we all must remain aware. There is a rela-
tionship between schedule contingency and schedule risk. The insertion of con-
tingency in schedules is motivated by the urge to reduce risk of failure. Although
adding contingency does not necessarily reduce such risk (because we learn to
use the contingency to let things slip), it does provide more room for error and
corrective action than we would have in a very tight schedule.

If we are to use contingency (which I highly advise) then this must be a man-
aged contingency. By a managed contingency I mean:

• We must know the basis for the contingency. That is, if we allow 2 days for
weather and 1 day for equipment, this should be noted.

• The contingency should be separated from the real expected duration.